Abstract
Thailand's industrial sector has grown very rapidly during the last two decades. This paper addresses the question “Can this fast industrial growth solve the problems of a large surplus of labor, unequal income distribution, and widespread poverty by absorbing the labor surplus in a decade or so?” Based on Hauser's labor utilization framework, and making an important revision in the handling of seasonal unemployment in the Labor Force Survey, the underemployed in Thailand in 1977 and '78 were estimated to be 8–9 million people, about 40 percent of the total labor force. If the industrial sector continues to absorb labor at the rate it did in the late seventies, it will be impossible for this sector to absorb this huge underemployed labor force together with rapidly increasing economically active population in a decade or so.
Despite of fast macroeconomic growth, it was found that income distribution worsened and the real wage rate of unskilled laborers stagnated during the sixties and the first half of the seventies.
The capacity of Thai industrial growth, led by large-scale foreign joint ventures and guided by government policies biased toward large-scale capital-intensive technologies, to absorb labor will be limited, since large firms are found to have much higher capital intensity and much lower capital productivity in comparison with medium ones.
A slowdown of labor absorption by the agricultural sector is expected in the near future, because the vast reserves of forest are mostly exhausted, having been converted to upland fields in the recent fast crop diversification process in Thailand, and intensification of agricultural technology is limited because the water control systems that precondition the intensification cannot quickly be constructed.
Based on this evidence, the answer to the question posed above will be negative if the Thai government continues to pursue similar industrial and agricultural development policies to those of the last two decades.
